Tax Glossary

The basis of property for purposes of calculating gain on a sale without taking into account any depreciation taken in earlier years but with adjustments for the section 179 deduction and any special depreciation allowance.

Transaction between independent and unrelated enterprises.

In relation to a dividend, the credit for underlying tax is credit for the tax levied on the profits of the company out of which the dividends have been paid. Such relief may be given either under a tax treaty or in accordance with unilateral provisions.

Tax which is charged on corporate income out of which dividends are paid, but which does not appear as a direct deduction or withholding from the dividend itself.

The amount of tax that has not been paid by either withholding or estimated payments but that has been properly reported on the tax return.

A penalty assessed for not paying enough tax through withholding or because estimated tax payments were not made in a timely manner.

The difference between the tax that should have been reported on the tax return (if all the income had been properly included and all the deductions correctly reported) and the lower tax that was actually reported on the return.

Annual tax imposed, in addition to the normal corporate income tax, on the undistributed portion of the profits or surplus of a corporation.

A substantial economic loss that would result in a taxpayer making payment on the due date of the amount of taxes with respect to which the extension is desired. Undue hardship is a condition precedent to the granting of an extension of time to make a tax payment.

Investment income (such as interest, dividends, and capital gains) and other income that is not generated by personal service (such as unemployment compensation, taxable Social Security benefits, pensions, annuities, and alimony).

Granting relief from the effects of international double taxation based on domestic legislation rather than the provisions of a tax treaty.

Land that has received no development, construction, or site preparation (i.e. raw land).

Under a unitary tax system, the profits of the various branches of an enterprise or the various corporations of a group are calculated as if the entire group is a unity. A formula is used to apportion the net income of the whole group to the various parts of the group. Usually a combination of property, payroll, turnover, capital invested, manufacturing costs, etc. are formula factors.

Liability of an investor which extends to the full extent of his personal assets, as in the case of a sole proprietor or general partner.

A person who is unmarried or legally separated from their spouse under a divorce or separate maintenance decree. State law governs whether a taxpayer is married or legally separated under a divorce or separate maintenance decree. A taxpayer is considered unmarried for the entire year if they can be considered unmarried as of the last day of the tax year.

The difference between realized gain or loss and recognized gain or loss.

The part of the stated principal amount of an installment sale contract that is treated as interest when the contract does not provide for adequate stated interest.

Dividends flowing from a subsidiary company to its parent company.

Tax on goods which are used within the taxing authority although the goods were purchased in another jurisdiction.

The estimated length of time it takes for property to wear out, decay, get used up, become obsolete, or lose its value from natural causes.